Do Commuters Free-ride? Estimating the Impacts of Interjurisdictional Commuting on Local Public Goods Expenditures
In an era of political pressure to reduce taxes while increasing government services, local officials face difficult choices regarding what services to provide and how to finance them. One outcropping of this dilemma is that local citizens are expressing concerns that commuters use local government services but without paying for them. In response, some communities are considering taxing commuters. In this study we develop a basic model of congestion in a two-city model to examine commutersâ€™ effects on the optimal provision of public goods. The theoretical result suggests that taxing commuters at the difference in marginal congestion costs between the two cities can attain market equilibrium. We then specify an empirical model to determine this taxâ€™s size for Pennsylvania municipalities. The econometric results show differences in marginal congestion costs between workplace and resident communities, providing evidence that commuters may free-ride. The difference in marginal congestion costs, however, tends to be small, so we advise policymakers to be hesitant in adopting such a tax.
Volume (Year): 33 (2003)
Issue (Month): 1 ()
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- Edwards, John H. Y., 1990. "Congestion function specification and the "publicness" of local public goods," Journal of Urban Economics, Elsevier, vol. 27(1), pages 80-96, January.
- Wildasin, David E., 1987. "Theoretical analysis of local public economics," Handbook of Regional and Urban Economics, in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 29, pages 1131-1178 Elsevier.
- Craig, Steven G., 1987. "The impact of congestion on local public good production," Journal of Public Economics, Elsevier, vol. 32(3), pages 331-353, April.
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